The FTC alleges that since January 2010 Defendants have engaged in a scheme to defraud consumers by selling them a service that purports to lower interest rates on consumers’ debts. The FTC claims that third party telemarketers, acting on behalf of CCG or FFA, call consumers and claim they will negotiate directly with consumers’ creditors to reduce consumers’ interest rates. The FTC contends that Defendants’ actions are misleading and unlawful.

After conducting a hearing and considering the evidence submitted by the parties, the Court makes the following findings of fact. Defendants entered into contracts with third party call centers to purchase orders from the call centers after they completed a sale of Defendants’ products.

For example, Balsamo testified that the call centers were paid between 55 to 60 percent of the purchase price for the product they sold and FFA kept the remaining balance. FFA’s and CCG’s jobs were to provide customer service and to process the payments by charging the consumers’ credit cards.

The job of customer service included handling calls to answer consumers’ questions on things such as billing, and providing refunds to consumers.

Defendants charged the consumers’ credit cards hundreds of dollars in fees before any service was actually provided. For example, Balsamo’s and FFA’s in-house counsel, Hank Walters (“Mr. Walters”), testified that after FFA bought the order from the call center, it ran a pre-authorization on the customer’s credit card to hold the funds, waited two days, and then charged the card.

After charging the card, FFA submitted the customer’s information to a “fulfillment center” to begin negotiations on behalf of the customer. Karissa Dyar and her company Consumer Budget Services (“CBS”), served as the “fulfillment center” for the Defendants.

Dyar testified that she entered into oral agreements with Robinson and Balsamo to negotiate credit reductions and other concessions from creditors on behalf of the consumers who purchased the Defendants’ products. Dyar’s company was in charge of mailing Defendants’ materials to consumers who purchased the products and of calling the consumers’ lenders to negotiate interest rate reductions.

The FTC introduced evidence in the forms of sales scripts and declarations of many witnesses showing that the third party telemarketers promised consumers that they would obtain specific, substantially lower, interest rates for consumers, such as 3%, 6 to 9% or interest rates in the single digits. The telemarketers further promised that consumers would realize a minimum amount of savings—typically, thousands of dollars—and that such savings would occur within a specific timeframe, generally within 3 months. The telemarketers also stated that consumers who sign up for Defendants’ services would be assigned their own personal financial consultants who would assist them in achieving these savings and benefits. Additionally, in many instances, the telemarketers stated that if consumers do not see the promised results, they would receive full refunds.

The FTC also introduced evidence showing that no interest rate reductions of any kind were obtained on behalf of many customers. Dyar testified that employees from her company, CBS, merely called the number on the back of the customers’ credit cards to begin their negotiations. There is no evidence that CBS had any special contacts or relationships with the lenders.

Further, only about 5 negotiators were available to service over 15,000 customers. The FTC further introduced into evidence documents showing that Defendants knew ahead of time that certain credit cards held by customers they enrolled in their program were not eligible for reductions because the lenders would not negotiate. Defendants Robinson and Balsamo paid the telemarketing sales rooms on behalf of their companies and handled refund checks to some of the customers who complained that they did not receive the services promised.

At the preliminary injunction hearing, Mr. Walters testified that when the TSR was amended in October of 2010 to prevent any upfront charges for debt relief services, FFA stopped providing debt relief services and instead established a web-based program called the “Financial Wellness Program.” Walters testified that this new program included services such as identity theft protection and a discounted legal services program. Walters testified that interest rate reduction services were added as a mere bonus to the new program and that customers were not charged for the bonus. However, Mr. Walters’ testimony is belied by the declaration of multiple consumers on the record who claim that they received phone calls from individuals calling on behalf of FFA offering debt relief services several months after October 2010. The record also contains at least one credit card statement showing that consumers were charged for such services months after October of 2010. – Source

Personally Liable

Individuals may be held personally liable for corporate FTC violations if the FTC shows that the individuals (1) participated directly in the deceptive acts or practices or (2) had authority to control them and had some knowledge of the practices. Here, Balsamo and Robinson as presidents of FFA and CCG knew or should have known that their respective companies charged customers upfront fees in violation of the TSR.

The FTC provided evidence showing that Robinson and Balsamo billed consumers directly, handled billing questions and provided refunds and chargebacks to consumers. Ms. Dyar testified that she entered into verbal contracts with Robinson and Balsamo for her company to serve as the fulfillment center for CCG and FFA. Robinson and Balsamo paid Ms. Dyar directly for her fulfillment services. Defendants knew or should have known that their companies charged the consumers’ credit cards before submitting the consumers’ information to the fulfillment center to begin negotiations on their behalves. Thus, Robinson and Balsamo are likely to be personally liable under the FTC Act.

Dale Robinson Confused

In response to the above action Defendant Dale Robinson filed a motion for an emergency hearing in which he said:

“This motion is filed today in an attempt to go before the court for clarification on the injunction placed against Dale Robinson and Ideal Interest Group LLC on October 17, 2012. I Dale Robinson am not represented by consul and am having a problem interpreting the legal terminology outlined in the injunction. I am attempting to stay in the legal guidelines of the FTC and am requesting clarification on what I am permitted to do or prohibited from doing.

In the last court hearing on April 17 2012, it was brought to the attention of the court that Ideal Interest Group was not mentioned in the original TRO filed by the FTC and has zero complaints againist the company. The only reason the FTC has any information about Ideal Interest Group is from documents recovered in the Mr. Robinson office. Despite this fact, all Ideal Interest assets are being frozen.

Also discussed in the April 17 2012 hearing was the fact that Ideal Interest Group does nothing but customer service, it makes no sales calls, or owns any merchant accounts. AII calls are inbound from customers that have already purchased the service. The FTC has yet to produce any evidence that would suggest otherwise.

In addition to the hearing for clarification, I also would like to address the court on the completely misleading statements used by the FTC to grant the injunction.

It is my understanding that the goal or job of the FTC is to gather evidence in an attempt to discover the truth about any complaints or business practices of a company. All the FTC has done to date is questions those customers that filed a complaint, it has yet to question a satisfied or happy customer. If the FTC only gets one side of the story, how can they accurately determine legitimacy of a company. The FTC has 150 or so complaints in 3 years out of 15,000 plus customers, if the allegation stated by the FTC were true, there would be 10,000 complaints.

During April 17 2012 hearing, Mr. Goldstein testified that out of 174 sample files, 130 cards were lowered. As the evidence shows, of the 130 cards lowered, it was on 107 of the customer received lowered cards. That means 61% were helped. In addition 1200 refunds were submitted to the FTC which means the other 39% or so received their money back per the agreement with the client. Of the 1200 new files Mr. Goldstein copied, 71% received lowered rates. If the backbone of the FTC allegations is “misrepresentation” and 70% are helped, how can it be misrepresentation? And again as the FTC has also agreed to, Ideal Interest Group or Dale Robinson does not make sales calls or assists in the sales calls, so like the April 17′ 2012 hearing covers, how is Ideal Interest Group or Dale Robinson held responsible?

If the injunction stands until the trial date set in 2014, it will destroy individuals ability to make a living, and it would be based on less than all the facts.

I please ask the court for a chance to be heard in this matter as quickly as possible as the FTC has once againf rozen assists and bank accounts. – Source

The Goldstein Testimony

Michael Goldstein is an investigator for the Federal Trade Commission. At the April 17, 2012 hearing he testified he removed 215 random client files:

Q. Okay. How many of those received interest rate reductions?

A. Of 657 [credit card accounts], 128 had received reductions, again, according to the paperwork, either permanent or temporary.

Q. Okay. And could you determine whether the interest rate reductions obtained were temporary?

A. Well, according to the paperwork, yes.

Q. And how many were temporary?

A. About 58 of those reductions were temporary.

Q. So that means that 81 percent did not receive any kind of interest rate reduction?

A. That’s correct.

Q. Okay. And did you make a determination about how many accounts received permanent interest rate reductions?

A. That would be, of the ones that received reductions, about 55 percent of those were permanent and 45 percent were temporary.

Q. How many of the accounts showed a reduction of any kind?

A. 19 percent of the accounts showed a reduction of any kind, 81 percent showed no reduction of any kind.

Q. Okay. And what percentage of the accounts showed no permanent rate reduction?

A. 89 percent of the those customer files showed no permanent rate reduction.

Cross Examination by Dale Robinson

Q. Sorry. Out of 174 test files, you found 130, roughly, cards had been lowered, so if we do the math and we use that as a basis for comparison of the rest of the 10,000 or so files that are there, you can conclude that 7,000 cards had been lowered either —

A. That’s incorrect.

Q. Why would that be incorrect?

A. Because you’re comparing accounts to customer files. There were 174 customer files, but each file may have contained numerous accounts.

Q. Correct. But what I originally asked was how many cards, period, saw a reduction in rates, whether permanent or temporary, when you came to the conclusion of roughly 130?

A. Correct.

Q. If you do the math, use it as a basis for comparison for the entire 10,000 and you multiply up, what I’m saying is at least 7,000 cards saw at least some type of reduction, whether permanent or temporary?

Q. I’m sorry. Again, according to what’s been presented by Ms. Claybaugh of the FTC, “specifically, they falsely claim they will negotiate lower interest rates for consumers”. So if we falsely claimed to negotiate lower interest rates and by your — the evidence you provided, we actually did lower interest rates, would that statement be true?

A. It’s true for some consumers, it was not true for the — pardon me, let me step back. It is not true for 81 percent of the accounts, it is true for a few of the customers, yes. – Source

Nope

The Court said, “Defendant asserts that he is having difficulty interpreting the legal terminology outlined in the preliminary injunction order issued by this Court on October 17, 2012 (Dkt. 161), and he seeks clarification of the limitations and prohibitions contained in the Order. Defendant also seeks to re-assert issues already addressed in the preliminary injunction hearing held by this Court on April 17, 2012, and which the Court has already considered in entering the preliminary injunction Order.

The detail with which the Defendant outlines in this motion his disagreement with the FTC’s position belies any assertion that he cannot understand the Court’s Order. Additionally, Defendant Robinson was quite adept at presenting his position before the Court at the prior hearing, such that the Court is confident he understands with precision what the Order requires, permits and prohibits. If Robinson has a specific inquiry about a specific provision, he can assert it in writing as he has done in this motion with respect to challenges to the scope of the injunction.”

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